The site recently rolled out SeedInvest Groups, a feature that lets managers of angel groups invite members to review deals and fund companies without doing so in the view of industry onlookers.
Privacy features like this could help curb the “herd mentality” that often plagues investing, suggests Ryan Feit, the chief executive of SeedInvest.
Investors and entrepreneurs discussed this issue at the Premoney.co conference in San Francisco this week. Serial entrepreneur Elad Gil observed that equity crowdfunding sites, along with accelerators and affiliated seed funds, give inexperienced investors lots of information. But they can lead investors to pile on, and inadvertently drive up startup valuations, when the investors sense buzz and see big-name backers around a particular company.
Mr. Feit says that the private setting enables professional lead investors to negotiate and establish terms and valuations appropriately. That way, he said, when a company opens the round up to a broader group of investors later, “they don’t have to negotiate with 100 people who all want something different, and could drive up terms, out of misguided enthusiasm.’”
Another angel-friendly facet of SeedInvest’s approach: It doesn’t charge investors to use the site and service, but takes a small percentage of funds from startups raising money on the platform.
Competing platforms like FundersClub Management LLC and AngelList (in partnership with SecondMarket) ask investors to pay administrative fees and/or carried interest on their deals.
SeedInvest conducts its own due diligence, and it has partnered with broker-dealer North Capital Private Securities Corp. to complete deals.
The Star Angel Network–a New York-based angel group that educates celebrities about startup investing and encourages them to back and advise entrepreneurs–recently used SeedInvest to fund a mobile entertainment company called Lisnr.
The executive director of Star Angel Network, Erica Minnihan, said the new SeedInvest Group features on the site helped “streamline the investment process, so that it took about one minute and a few clicks. It also provides a very convenient way for [managers] to share information on a deal with [their] membership.”
Star Angel Network also used SeedInvest to privately share investor documents, deal memos and Webcast management presentations with members, she said.
One of SeedInvest’s backers, Tom Chisholm, an angel investor and the founder of Viecore Inc. (acquired by Nuance Communications Inc. NUAN -1.23% in 2007), said he expects the company to be one of the top players in the nascent crowdfunding industry because of its connections to “investors who do a meaningful volume of deals and have a high rate of success with these.”
He believes crowdfunding will see a proliferation of equity investing sites but will eventually consolidate down to half-a-dozen leaders in the field.
Write to Lora Kolodny at firstname.lastname@example.org. Follow her on Twitter at @lorakolodny
Source: WSJ – By Lora Kolodny